Correlation Between Shengtak New and Anhui Deli

Can any of the company-specific risk be diversified away by investing in both Shengtak New and Anhui Deli at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Shengtak New and Anhui Deli into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Shengtak New Material and Anhui Deli Household, you can compare the effects of market volatilities on Shengtak New and Anhui Deli and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Shengtak New with a short position of Anhui Deli. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shengtak New and Anhui Deli.

Diversification Opportunities for Shengtak New and Anhui Deli

0.61

Correlation Coefficient

Shengtak New  Anhui Deli

Poor diversification

The 3 months correlation between Shengtak and Anhui is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Shengtak New Material and Anhui Deli Household in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anhui Deli Household and Shengtak New is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Shengtak New Material are associated (or correlated) with Anhui Deli. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anhui Deli Household has no effect on the direction of Shengtak New i.e., Shengtak New and Anhui Deli go up and down completely randomly.

Pair Corralation between Shengtak New and Anhui Deli

Assuming the 90 days trading horizon Shengtak New Material is expected to generate 0.53 times more return on investment than Anhui Deli. However, Shengtak New Material is 1.88 times less risky than Anhui Deli. It trades about -0.04 of its potential returns per unit of risk. Anhui Deli Household is currently generating about -0.23 per unit of risk. If you would invest  3,207  in Shengtak New Material on September 29, 2024 and sell it today you would lose (50.00) from holding Shengtak New Material or give up 1.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Shengtak New Material  vs.  Anhui Deli Household

Shengtak New Material

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shengtak New Material has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Shengtak New is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Anhui Deli Household

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anhui Deli Household has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Shengtak New and Anhui Deli

The main advantage of trading using opposite Shengtak New and Anhui Deli positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shengtak New position performs unexpectedly, Anhui Deli can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Anhui Deli will offset losses from the drop in Anhui Deli's long position.

The idea behind Shengtak New Material and Anhui Deli Household pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.